They say that death and taxes are inevitable for all of us. This statement itself is indicative of just how worried most people are about the Australian Tax Office interfering in their affairs. As much as we might like the services that we enjoy in our society, taxes are one aspect that most people will complain bitterly about from time to time.
How Should You Deal With an Audit?
It’s the call that every business owner worries about: the ATO audit. The tax office wants to ensure that businesses are tax compliant in the context of their obligations, but the real truth is that an audit can be a pretty painful and drawn out process. If a business owner isn’t prepared for an audit, things can start to go wrong pretty quickly.
So, how can you best prepare for a tax audit? Here’s some sage advice:
- Organisation: The tax office is far less likely to find problems with your business if your books are already well in order. This means that it’s essential to ensure that your business is well organised even before the tax office calls to audit you.
- Remain calm: Whether you are well organised or not, the key thing to remember is to stay calm when they do call. It’s important to place some useful context around the situation and to remind yourself that other people get audited and it is not a conspiracy. Even if there are mistakes in your bookkeeping, the fact is that most things can be solved pretty quickly. In general, people like to associate being audited with some of the worst things in life. It’s good to remind yourself that there are far worse things in life!
- Take some time: When the auditors call they will ask some probing initial questions. It’s important at this time not to be intimidated. They have a job to do and it’s important to recognise this fact. They will record your answers to their questions, but this should not be scary. If you are not sure of an answer, just be upfront and honest, rather than make up an answer that might be wrong. It’s better to check with your accountant than to fire off an answer to the auditors that might raise some red flags.
- Just answer the questions: The ATO will ask plenty of questions, to which they want truthful answers, but the important thing is not to provide irrelevant information. The truth is that taxes are not easy, even for the biggest of businesses, and mistakes do happen. Unless you’re engaged in serious fraud and tax avoidance, you likely have very little to actually worry about. Don’t volunteer any information unless they specifically ask for it. After all, you know your business better than they do and you have control over what you tell them.
Just Take it Slowly
No business owner likes to be audited, but it always remains a possibility. The important thing is to remain calm, get organised, and answer the questions truthfully when you have the right information at hand.